Posts Tagged ‘pension’

What Happens To Your Pension When You Die?

Friday, September 14th, 2018

Written by Carla Seely for Bernews.com.

What happens to your pension when you die?

Anyone who knows me will know one subject I skirt around and immensely dislike talking about is death; I don’t even like using the word – it is just so final.

For me personally, I am not sure whether I am afraid of dying, or if I am more afraid about being told I am going to die and only have a certain amount of time to live. I don’t want the pity stares or the “I am so sorry” comments.

I can’t imagine what my mum at age 63 felt when she was told she had terminal cancer and only 1–2 years to live. She never made it to her 65th birthday, but what she did do was make sure her affairs were in order and that her estate would be distributed as per her wishes.

A common question we get in the pensions industry is in regard to what happens to a balance in a pension upon death. It’s a valid question, and the answer depends on whether it is pre or post retirement, what type of pension product you have now and what option you might select in the future.

First things first: your company’s pension plan, whether it is a defined contribution or defined benefit, will have an option to designate a beneficiary; this also applies to individual pension plans. A beneficiary as it relates to your pension plan means, in the simplest terms, the person[s] whom you designate to receive the retirement funds in the event of your death.

When you enroll in your company pension plan or open an individual pension plan, there will be a section to fill out regarding your beneficiary designation: it will ask for the specific details of the beneficiary and what percentage of the pension balance you wish to leave them in the event of your death.

The amount designated to the beneficiary will be represented as a percentage, e.g. 100% to a spouse. You may elect to have multiple beneficiaries, e.g. 50% to a spouse and 50% to a sister, but most importantly, if there is a balance in your pension plan, who you leave it to and how you decide to split it is entirely up to you.

It is also important to note that a beneficiary does not need to be a family member – you can leave it to anyone, including a charity. However, one disclaimer is that if you put down a beneficiary that is under the age of 18, you must include a trustee who will take care of the funds until the minor becomes of age.

Once you retire and you want to start receiving a retirement income from your pension, you need to study the options available with the company that administers your pension plan, and also see what the competitors are offering to ensure you select a retirement option that supports your retirement goals.

Whether you choose an annuity with monthly payments or select the drawdown method to receive retirement payments, each retirement options has its own set of rules regarding how any residual balance would be treated with regard to a beneficiary.

Sit down with your pension provider and make sure you understand each option and the impact each option will have on retirement. The last thing any retiree wants is to discover they are locked into an option that isn’t working.

As I tell all my clients, we all work hard for the money we make and we can’t change our fate, but we can make intelligent decisions about our retirement.

– Carla Seely is the Vice President of Pension and Investments at FM Group. If you would like any further details, please contact her at cseely@fmgroup.bm or call +1 441 297 8686.

How To Retire Well

Monday, August 25th, 2014

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How well prepared are you for the retired life?

The first consideration for retirees is to be sure that you have enough money saved and invested to sustain your financial needs during your retired life. Aside from the basics, you want to be able to sustain a chosen lifestyle. Setting aside some funds for emergencies and cash needs adds to your security. Continuing to save and invest during your retirement helps you to hedge against outliving your retirement assets. According to U.S.News & World Report contributor, Dave Bernard, there are steps to help you make the transition into a happy retirement that involves setting personal goals and working toward achieving them.

The first consideration in your preparation is to decide what will you do? (more…)

Expenses You Must Include In Your Retirement Budget

Saturday, August 9th, 2014

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How accurately can we estimate and budget for our retirement future? While individual lifestyle will dictate your expenses, a report published by U.S. News & World Report lists the expenses that are shared by all retirees and must be budgeted for.

  • Health care costs will be one of the biggest expenses you must deal with in retirement. A 65 year-old couple retiring in 2013 will need $220,000 to cover health care costs during retirement, according to calculations by Fidelity. This figure is based on average life expectancy. The cost of long-term care services depends on whether you receive it at home, in adult day care, at an assisted living facility or in a traditional nursing home. The average cost of a private nursing home is about $90,000 per year, assisted living facilities average $3477 per month and hourly home care rates average $46 for a Medicare-certified home health aid, according to MetLife.

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Five ways to wreck your retirement (and marriage)

Monday, July 21st, 2014

Spending your retirement in comfort depends largely on what you and your spouse do today.

Retirement, like marriage, comes under enormous strain when money is constantly an issue and recognizing this sooner rather than later can make the difference between traveling and living out your years together in relative comfort or having to scrape by for years as you get older and less healthy. It’s a pretty stark contrast.

Here are five things to avoid with your retirement today:

1. Not saving early or often

It’s the little things that add up. While you may think there’s plenty of time between your current situation and retirement, saving now means you won’t have to catch up later, when you may face other issues or unplanned expenses. It’s also the single most effective habit you can develop: saving a little bit all the time.

2. Underestimating your needs and lifestyle (more…)

Insuring your retirement is not unlike insuring your car

Sunday, July 6th, 2014

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You can insure your home and car from disasters and accidents. Life insurance essentially protects your family from the loss of your income should tragedy strike. You can’t insure your retirement accounts in the quite same way, but there are a few tried and true strategies that can help safeguard them.

1. Save for retirement even during…retirement

There is no rule that you have to stop investing when you hit your golden years. One of the best hedges to outliving your retirement assets is to continue investing even when you reach retirement age. While there are mandatory age distributions from 401(k) retirement plans and traditional IRAs, you can continue to make investments in other assets during your retirement.

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Grow up financially while you’re still young.

Monday, June 23rd, 2014

imagesThe old adage of ‘the earlier you start to save for retirement, the better’ holds true today especially today. Here are a few questions you should ask yourself when starting to think about your options:

How much should I save?

Try to start out at around 15 percent, and that’s a minimum figure — 15 percent of your salary. It should be as easy putting that much away and more into a 401(k) plan. If you have a 401(k) with a match, up to half can of your savings can come from your employer.

Where should I invest my savings?

Index funds are a great way to get started since they allow you a wide range of investments including funds that invest in domestic stocks and bonds, and international stocks. A solid investment portfolio mixes equal parts of all three. The key aspect of an index fund is that it is generally cheaper.

What if I have a low paying job that doesn’t allow me to save much? (more…)

Hey, your 401(k) is not a piggy bank.

Saturday, June 7th, 2014

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With a piggy bank, you put money in and take it out. It’s a fairly simple tool, and it’s great for what it’s used for. A 401(k), on the other hand, is a great tool to save for retirement. But increasingly, they are being used as something they aren’t: piggy banks.

Recent studies show that Americans are increasingly pilfering from their 401(k) accounts. With the economy being the way it has been since the financial crisis, that’s understandable on one level, but the choice can put your retirement plans on a slippery slope.

According to the IRS, a whopping $57 billion was withdrawn prematurely from 401(k) accounts in 2011, up 37 percent in inflation-adjusted dollars from 2003. You could argue that if a person needed the money to survive, then an early withdrawal from a 401(k), even with the tax penalty, is better than most other options – to a point.

Unfortunately, younger individuals are withdrawing the most. According to a recent study, nearly 40 percent of workers between 20 and 39 cash out their plans when they change jobs.

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Being financially savvy with your 401(k) can earn you more.

Tuesday, May 27th, 2014

If ever you needed an incentive to learn more about money, this might be it. A new study shows that the more financially savvy you are, the more you’ll earn on your 401(k) plan. And not just a little bit more, a whole lot more–up to 1.3 percentage points more per year on your retirement plan investments than your less sophisticated counterparts.

In fact, being financially literate could help you build over the course of a 30-year working career a retirement fund some 25% larger than that of less-knowledgeable peers, according to the study, “Financial Knowledge and 401(k) Investment Performance,” which was recently published as a working paper on the National Bureau of Economic Research website.

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Your 401(k) can start to blossom this spring with these handy tips

Monday, May 5th, 2014

Unless you scour the voluminous info about your plan (which you should, but probably don’t) you might miss some important tips that can make a real difference in your planning down the road.  Here are seven things to bear in mind when reviewing your porfolio.

1. You can rollover.  When you leave your employer, you can transfer your 401(k) plan to an individual retirement account – and it is not a taxable event. This type of transfer is called a rollover. Many 401(k) participants think that any type of distribution from their 401(k) plan is taxable and subject to penalties. That isn’t true.

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Happy retirement: Stop worrying about paying taxes.

Monday, April 28th, 2014

When you contribute to a Roth IRA you typically don’t have to worry about paying taxes on that money or its investment gains ever again. And employers are increasingly adding a Roth option to their 401(k) plans. Aon surveyed 400 employers covering 10 million employees in 2013 and found that half now offer a Roth 401(k) plan. Here are some of the benefits
of saving for retirement in a Roth account:

Having a tax-free account in addition to your pre-tax savings gives you more options to reduce taxes in retirement.
Tax complications don’t end when you leave the workforce. In fact, your taxes in retirement can actually be more complicated than in the years when you were working. For the most part, you’ll want to withdraw money you have in taxable and Roth accounts first and delay paying taxes on your savings in traditional retirement accounts as long as possible. But it’s also possible that you could pay significantly higher taxes if you delay too long and your traditional retirement account gets big enough for required minimum distributions to force you into a higher tax bracket. With money in different pots, you’ll have a chance to run different scenarios and maximize your after-tax retirement income.

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